Steel Official Derides Offers Of Help Structural President Says Allentown Firm Was Losing Millions

January 26, 1989|by JOHN CLARK, The Morning Call

The financial losses of Lehigh Structural Steel Co. were so severe that it would have been futile to consider help from the city or state, the president of the Allentown-based company said yesterday.

R. Leslie Mullen, the direct-talking president, was responding to reports that city officials were surprised that the company did not seek city assistance before announcing Tuesday afternoon that it would terminate most operations at the plant by March 24 and sell off its Utilities Service Co.

"Would you, as a taxpayer, loan money to a company that's losing several millions of dollars a year knowing that you probably won't get that money back?" he asked rhetorically.

Mullen cited heavy financial losses and the inability to obtain financing and bonding for future operations as the major reasons for the shutdown.

He said about 185 of the company's 225 employees will be laid off.

Mayor Joseph S. Daddona and other city officials, who learned of the shutdown late Tuesday, expressed surprise that Mullen had not turned to the city for help.

Daddona said had he been aware of the situation he would have asked his staff to get involved to see what, if any, assistance the city could offer.

Mullen brushed off Daddona's comment as being "typical Joe Daddona" and termed it "ridiculous" because of the financial status of the company.

Mullen said he had sought funding from all available sources, but was unsuccessful. He said the March 24 shutdown complies with the federal 60-day employee notification law, which becomes effective Feb. 1.

Blaming much of the company's problems on Canadian steel imports, Mullen said the company lost about $10 million during the last five years, despite significant wage and benefit concessions by employees.

He said the Canadians have a big advantage over American companies, in part due to the currency exchange rate.

"They have 25 percent on us in the exchange of the dollar," he said.

Given that advantage, Mullen said if his company bid a job at cost and the Canadians bid the same job for the same price, the currency exchange different would give the Canadians a 25 percent profit margin.

"Now how can you compete with that?" he asked. Additionally, he said the Canadians' efforts are concentrated in the New York and Philadelphia markets that traditionally were served by Lehigh Structural and other American companies.

The American Institute of Steel Construction in Chicago supported Mullen's contentions.

"The Canadians are importing a quantity of fabricated steel into the United States," said Neal Zundel of the American Institute. "That concentration seems to be in New York and the northeastern area of the country."

He continued, "The Canadians are not under the Voluntary Restraint Agreements (VRAs) like Korea and Japan. Therefore, they have had a free reign on what they would like to bring in. We at the Institute felt there was cause to bring a dumping suit against the Canadians because we felt their price was not representative of the fair market value of the product."

Zundel said as result of that unsuccessful suit, the Canadians decided to reduce their imports to comply with the level they had prior to the VRAs.

He said at one point the Canadians were flooding the American market with more than 120,000 tons of fabricated steel a year, with much of that concentrated in the Northeast.

Zundel said that figure was reduced in 1988 to about 90,000 tons. Overall, the institute contend the Canadians have a 4.5 percent share of the American market.

"The percentage isn't the big problem," Zundel said. "It's the concentration." He said the Northeast is a primary target of the Canadians because most of the Canadian fabrication plants are just across the border.

The Canadian impact is so devastating that some American fabrication companies bought by Canadians haven't been able to survive.

To illustrate that point, Mullen pointed to the the death of Steel Structures Corp. in Salisbury Township. Acquired by a Canadian investment group, the company closed in 1987 after only 2 1/2 years of operations.

"You see, the Canadians can't even compete with themselves in this market," Mullen said.

In addition to the Canadian impact, Zundel said the fabrication industry is suffering from over-capacity because of the decline in the construction of office and industrial buildings.

Zundel attributed much of that decline to changes in the tax law. Those changes, he suggested, reduced the incentive to invest in such development.

Zundel predicted that the fabrication business will decline another 7 percent in 1989 and that it will not begin to rebound before late 1990 or early 1991.

Similar contentions about the the Canadian impact and forecasts were made by the American Iron and Steel Institute in Washington, D.C.